Conflict over funding for SMEs looms

EU INDUSTRY ministers are set to clash over whether small is beautiful enough to deserve extra cash, when they discuss European Commission plans to boost funding for small and medium-sized businesses next week.

The EU’s biggest paymasters, Germany and the UK, have warned ahead of next Thursday’s (14 November) meeting of industry ministers that the Commission’s demand for 180 million ecu for the 1997-2000 programme to help smalland medium-sized enterprises (SMEs) is unacceptably high.

The UK insists that the SME budget should be left unchanged at 112 million ecu and Germany claims it will not accept any figure higher than 120 million ecu. Diplomats say that France, the Netherlands, and Sweden have indicated that they will support a budget of up to 130 million ecu.

This powerful alliance would easily suffice to throw out the Commission’s proposals, which can only be approved with the unanimous agreement of all 15 EU member states.

Rejection of the Commission’s funding bid would be a fresh blow to Commission President Jacques Santer’s ‘confidence pact’ for employment. Santer wrote an extra 40 million ecu into the SME programme after juggling the EU budget to favour policies designed to create new jobs.

The move came after Commission studies found that small businesses were not playing their full part in boosting the creation of jobs and replacing those shed by large multinationals.

Other aspects of Santer’s confidence pact have already been shot down by EU heads of state and finance ministers. These include proposals to increase funding for a series of sectoral research programmes and provide ‘seedcorn’ cash to private companies and governmentsfor the construction of key Trans-European Networks (TENs).

The signals sent by national governments will lay down the parameters for the funding debate, but officials stress that it will be ministers, the European Parliament and the Commission together who will settle the final sum.

MEPs are fervently in favour of strong support for themulti-annual programme and so, according to diplomats, are the Irish presidency and countries which are net beneficiaries from the EU budget, such as Spain and Italy.

Officials say that if ministers set the amount too low, the Commission may then shift the argument and demand an annual budget line to keep hopes alive of more funding in future years.

Member states challenging the proposed increase in financing for the SME programme argue, to varying degrees, that they can do the job better at a national level and that with tight domestic budgets there is no room for the Commission to increase spending.

Germany has pinpointed a series of pilot programmes, in areas such as management and research and development, as the target for particular criticism.

The European Associationof Craft Trades and SMEs (UEAPME), headed by Hans Werner Müller, has condemned industry ministers for preparing to pare a relatively small programme for SMEs while continuing to pour funds into high-profile projects which tend to favour the established big players.

“They are spending 100 million ecu on wide-screen television which will initially benefit only a few big companies,” said UEAPME spokesman Garry Parker.

He added that an unchanged budget of 112 million ecu after 1997 would actually amount to a reduction in real terms, since the cash would have to be shared for the first time with the EU’s three new members, Finland, Sweden and Austria, and the programme would run for six months longer than its predecessor.

Parker maintained that failing to fund the SME programme fully would cost penny-pinching governments more in the long term, adding: “We employ 70% of Europe’s workforce. If every small and medium enterprise took on one person that would be the end of Europe’s unemployment problem.”UEAPME believes that a year-old project which provides atwo-way channel for small businesses to help shape new European standards, and to be alerted once they are agreed, is likely to be one of the first casualties of a smaller budget.